Knowledge and Insights

Preventing Business Exploitation In A State Of Vulnerability

By:
Gina Holland | April 2020

As the days go by, business owners and individuals are receiving volumes of information on how to survive the COVID-19 pandemic. Channels of communication include news media outlets, advertisements, telephone calls, emails and text messages.

A worldwide pandemic mixed with an ounce of fear and vulnerability gives fraudsters a recipe for exploitation. Given the amount of circulating information, current evolving loan programs and desperation to continue operations, small business owners are prime targets in becoming victims of fraud during this time of economic distress.

As noted in recent news and media headlines, the Small Business Administration (SBA) has launched the Paycheck Protection Program (PPP) to assist small businesses with maintaining payroll costs, retaining their full workforce and paying eligible overhead costs. There are several benefits to this program including low interest rates, streamlined underwriting, deferred payments and loan forgiveness opportunities. However, no reward is gained without undertaking some risk.

Loans under this program do not require personal guarantees or collateral. Additionally, the same level of underwriting or verification of information as one would expect with a standard loan application is also not required. Lenders are permitted to rely on borrower certifications that the required information provided is accurate.

The lax underwriting standards for this new program may create opportunities for fraudsters to pull off business and/or individual identity theft through their ability to gain access to financial information and funds offered by the program. Que the criminals.

Fraudsters will capitalize on the current economic distress in order to obtain access to financial and personal information. Criminals may gain access to a business or owner’s information by deploying various scams including: impersonation of individuals representing the SBA or IRS; requests for personal, business or financial information via phone, text, or email; and requests for upfront payments in order to receive loan proceeds from the program.

Once this information has been obtained, criminals may go to great lengths to forge business documents, create fictitious payroll records and/or tax documents, and submit fraudulent applications; increasing the risk of account takeover occurrences. Individuals may obtain the opportunity to apply for relief funds that they are not entitled to.

Steps business owners can take to protect both their individual and business identities include:

Protect non-public identifiable information and other important data.

Remain alert and be aware of phishing attempts.

Look out for unsolicited phone calls, text messages and emails.

Obtain information from reliable, reputable and legitimate sources.

Lenders participating in this program should continue to follow existing protocols to properly identify and verify applicants. In addition, lenders are still expected to abide by banking laws and regulations on information collection and reporting requirements for customers. It is also important that lenders work to ensure that the underlying data and sources of information that business owners are providing with the loan applications are accurate and reliable to reduce the risk of fraudulent applications.

Due to the current conditions as a result of the COVID-19 pandemic, business owners and individuals are desperately seeking assistance to keep their businesses afloat. As we continue to tread through these unprecedented times, it is important to know that neither the SBA nor the IRS will initiate contact regarding the Payment Protection Program and there are no upfront payments required. Exercise due diligence and proper judgment when searching for ways to obtain relief during this crisis and take the proper steps and necessary precautions to protect your individual and business identities.

If you’re a business owner or lender overwhelmed with the challenges and burdens of the PPP application process or other relief options available in response to the COVID-19 crisis, contact Mercadien for assistance. Mercadien’s COVID-19 task force can quickly and securely evaluate and analyze information about applicants, including payroll filings and certifications necessary for potential eligibility and forgiveness. Based on the information provided, we can assist the business or the lender with confirming borrower eligibility, maximum loan amount calculations as well as forgiveness applications and underlying supporting documentation. We know supporting your business is your priority and supporting you is ours! For more information, contact Frank Pina at fpina@mercadien.com or 609-689-2319.

Find out how Mercadien can help you and your organization through our COVID-19 services:

DISCLAIMER: This advisory resource is for general information purposes only. It does not constitute business or tax advice, and may not be used and relied upon as a substitute for business or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified accountant, tax practitioner or attorney licensed to practice in the jurisdiction where that advice is sought.